As a professional in the recruiting world, I love watching employment and hiring trends and the way the decisions we make as a collective nation affect us immediately, and the ripple effects of our decisions over time. In the past decade, with the popularization of the Internet for public use, a microwave mentality has crept into our daily lives. We want everything instantly. If something doesn’t happen immediately, then we become impatient and antsy. As a result, we have forced companies to create some efficiencies to help streamline the delivery of products and services for our consumption. This is fantastic, as I believe it creates much-needed competition and quality control in commerce. However, in many instances, our desire to have what we want, right here right now, creates an urgency that forces shoddy workmanship and thus produces cheap / ineffective products or services that, if we could have waited a little longer, might have produced a higher quality, more beneficial product or service. Our impatience as a society has forced operational efficiency in some area, however in other areas it has produced poor quality work.

What does this have to do with the disappearance of the traditional employee? Last week, Paul Hebert wrote a great post on Fistful of Talent asking the corporate world to consider employee attraction and retention practices if the anchors of employee benefits, which include healthcare, were not in place to entice them to come on board. As well, earlier in the week my colleague Dave Mendoza pointed out an article from the Wall Street Journal that talked about the implications in the workforce of the healthcare bill in its current form, should it pass through Senate. (update: as of Christmas eve the Senate gathered enough votes to pass this bill)

Whether we want to admit it or not, healthcare is a huge issue today. And it’s going to affect more parts of our lives than just how we’re able (or not able) to obtain coverage. Most believe we need healthcare reform. Some think what got rushed through Senate will take care of that. Others don’t, and would like to slow down and consider some other viable options. While this is not the time or place for discussion of your position on this, I think we can all agree that whatever comes out of this situation is seriously going to affect many parts of our lives outside of our health. Including our employment situations.

Having read both of the above linked articles, and taking into consideration what I’ve learned over the years on the inside of HR and recruiting practices, I came up with this prediction:

Over the course of 2010 we will see a decline in direct-hire employees and a rise in both contractors and entrepreneurs in the workforce.

Let me just say that I am by no means an economic or social expert. The things I’ve considered in taking my stance on this prediction are simply from observing my community, my industry, and people in general. I could be completely off-base, or I could be spot on. I am simply one person with an opinion and a thought I’d like to share, with a few personal observations to back up why I think the way I do. I appreciate you respecting my thoughts in this and taking the time to read about them, even if you disagree with them.

So, why am I predicting this? Here are a couple of observations:

With the astronomically rising cost of healthcare coverage for employees (mind you, this has been going on for years and I fully recognize that it did not start with the onset of the government wanting to take over healthcare, but I certainly don’t feel it will be alleviated by the proposed bill either), companies are less and less inclined to offer this benefit to employees. Thus, a reasonable alternative is to hire contractors, putting the financial and benefit burden off of themselves and onto the contractor’s shoulders.

Necessity is the mother of invention. With the number of people unemployed or underemployed still in double-digits, it makes for a better environment for creativity in creating income, thus encouraging individuals to start a business and be self-employed.

This could be a fantastic thing. I think for some people, self-employment is the way to go. It’s not for everyone, but for those who are not averse to taking a risk, the reward can be great.

But it’s not guaranteed… and there are things to consider that companies eliminating offering benefits could have an impact on when it comes to employment, and ultimately, retirement:

With companies being less and less inclined to either offer healthcare benefits (and consequently 401K and retirement), or being more inclined to hire contractors so as not to shoulder the burden, this will force people to have to be proactive in seeking out their own healthcare and investment opportunities. From personal experience, I know that purchasing healthcare independently is quite expensive, and that cost will only continue to rise. I’ve read that as much as 21% of one’s income would go to nationalized healthcare, should it be instituted. *again, I’m not an economic expert, this is just what I’ve read and heard from those who live in countries with nationalized healthcare, like my friend’s mother who was a nurse in the British NHS for 40+ years – she would know!*

According to the Bureau of Economic Analysis, our rate of savings over the past decade is pitiful, averaging near 3%. For the average household which makes about $40,000 per year, that’s a pathetic savings of $1200 yearly. In all reality, most Americans save nothing at all when you count credit card debt, car payments, and home mortgages. So obviously our rate of savings leaves a lot to be desired already. Being forced to purchase government-mandated healthcare coverage because our employer simply can’t foot the bill any longer could essentially wipe out the ability for people to continue saving even at a meager 3% rate.

Ripple effects:

For both employer and the individual:

What is a company’s incentive to hiring direct when they have to pay such astronomical costs for benefits for their employees? I believe companies will start to hire more contractors; then they won’t have to shell out for the benefits. Could be a good thing, as it would encourage more entrepreneurialism, which ultimately leads to the creation of more jobs.

For the individual:

As a result of this, contractors will end up paying out-of-pocket for health insurance (expensive), & there will no longer be ‘auto’ savings in the form of 401Ks or retirement plans – through the company, at least. Making those decisions will be left up to the individual. Again, this could be a good or a bad thing, depending on the level of personal responsibility of that individual. But as seen in the above example of personal savings over the last 10 years, it’s not a likely scenario for many.

For the employer:

An increase in recruitment and hiring costs. Employees are more likely to be loyal to a company than contractors. While contractors don’t carry the cost of insurance and 401K matching, it’s an expensive process to constantly hire new and renew existing contractors. It gets even more expensive if you’re going through a 3rd party contract provider, because not only are you covering the contractor’s rates, but the escalated rate of the provider in order for them to cover their operating costs.

Distant future ripple effects:

With the decline in savings in the US, as the X and Y generations reach retirement age, there will be even more of an increased demand for someone else to foot the bill, unless we get a grip today on taking personal responsibility for our futures.

I’m all for entrepreneurialism – if you feel called to be self-employed I totally support that! Just make sure you prepare for your future. The great thing about being self-employed is that you rely completely on your own efforts. The downside of being self-employed is that you rely completely on your own efforts. There’s no one there to blame but yourself if retirement time comes around and you didn’t plan ahead enough.

My recommendations for this 2010 prediction:

Individuals: Be personally responsible. Start saving today. If you don’t believe you can, find a way. I’m sure there are things in your budget you can cut back on. Do you really need that daily Starbucks latte, or 5000+ TV channels?

Companies: continue to offer benefits and have a leg up on your competition for talent. As other companies drop benefits like a bad habit, a company can use this to their advantage by continuing to offer them as value-adds for new hires. You’ll attract more, and loyal, talent if you offer something that your competitors no longer can.

Don’t bite the hand that feeds you, or it will cease to do so. Companies aren’t perfect, but employees aren’t either. Remember that the next time you’re grumbling about the popcorn tower your company gave you for a holiday gift as you’re stealing office supplies. The fact that many companies DO currently offer benefits is a privilege, NOT A RIGHT (please do not confuse the two). Yeah there are some companies out there that do shady business or don’t treat their employees well. If you work for a company like that, you have the option to leave. No one is hand-cuffing you to that desk, regardless of what you may think. (by the way, if your response to this is “but I can’t leave; I’ll lose my benefits!” – I suggest you re-read the bolded text that started this bullet point…)

Be THANKFUL for what you do have. If you currently work – you are much better off than 17% of this country as of September this year. Be careful, and think about the things you ask for; consider all of the consequences, short- and long-term. The long-term ripple effect might overcast the short-term benefit.

Disclaimer: I anticipate many varying viewpoints on government-controlled healthcare as related to this post. I don’t feel this post, or this blog, is the correct venue for that discussion, however, you have a comment to make about the rise in contractor / entrepreneur status as compared to employee status, feel free to do so! If you’re insistent upon sharing your opinion on healthcare, you are more than welcome to email me directly and I’ll be happy to engage in a civilized conversation. Thank you for respecting my space and I look forward to an engaging exchange!

I agree with you about the rise in unemployment in the coming years. I think that the younger the worker, the more likely they are to strike out on their own and become contractors or entrepreneurs. This will become easier as the costs of health insurance come down or Universal care becomes more available. Right now, healthcare benefits are the only thing keeping me in my current job because of pre-existing conditions. I look forward to being able to strike out on my own and be my own boss!

Well said Amybeth! I’d love to strike out on my own (and did work as a contract recruiter in the past) but needing to provide health benefits for my family means I MUST work for someone else as I just can’t find them affordably on my own.

Right now I’m wanting desperately to leave a MISERABLE corporate sales manager job and go BACK to the recruiting / staffing industry but my main hurdle has been that since I’ve been in management no one believes I really would be happy as “just a recruiter”…recruiting and sourcing are what I loved and miss…so here’s hoping 2010 gives me a break!

Hi Amybeth,
I came across your blog during my research on a book I am writing and read your latest post with interest. I have to say I am of a similar opinion on your prediction of a rise in contract workers, although since I am a contractor I had wondered if my view was skewed by my own situation.
A couple of additional reasons why I agree with your prediction:
1. Companies will be more wary about hiring again after the GFC and therefore contractors may feel like a less risk option
2. Contractors means reduced overheads on fixed costs and therefore will be more appealing on a short term viewpoint
3. The rise of personal brands- professionals are taking ownership over their own brand, as opposed to strictly promoting their employers.
4. Character traits of Gen X and Gen Y.
Happy New Year to you from Australia!
Shireenhttp://au.linkedin.com/in/shireendupreez